Bank rejects claims it has lost all credibility over ditching bond sale

A Manchester broker claims challenger bank Metro Bank has lost all credibility in the market after it ditched a £250m bond offering yesterday due to a lack of demand from investors.

The bank, which is due to open new sites in Manchester and Liverpool in December, hit back, saying it has a strong liquidity position.

The bond offering, launched yesterday morning, failed to attract investors despite offering a hefty 7.5% yield on the four-year bond.

By 1pm yesterday the bank had received orders of £175m, leading it to rescind the offer.

The bank was attempting to raise cash to meet a regulatory deadline in January next year.

In January this year the bank revealed an accounting error that wiped £1.5bn off the value of its stock.

Its share price has dropped nearly 90% since the start of the year.

Russ Mould, investment director at Manchester investment company AJ Bell, said: “The cancellation of a £200m bond sale is another major blow to Metro Bank, leaving management with red faces and the shares sinking even further.

“Failure to get enough support for a product that is yielding 7.5% is quite remarkable when you consider how investors are struggling to find generous levels of income in the current market.

“It suggests that investors don’t trust the bank or they believe the 7.5% yield is simply not high enough to compensate for the risks of owning such a product.”

He added: “Metro Bank has lost all credibility with the market after accounting issues earlier this year and a regulatory investigation. The failure of the bond sale adds another negative factor to its bow.”

A Metro Bank spokesperson said: “Metro Bank PLC thanks the broad number of investors who have met with the company and shown interest in its potential inaugural MREL issuance.

“Given the current market conditions Metro Bank has decided to not proceed with a transaction at this time.

“Metro Bank has a strong capital position and, therefore, the flexibility to raise MREL at the right time for the bank.”

The spokesperson added that the store openings in Manchester and Liverpool will go ahead as planned: “Our support of Liverpool and Manchester is absolutely unwaivering and they will open as planned in December,” the spokesperson said.

The Manchester store will be on Market Street and will have more than 3,000 safe deposit boxes for customers to store their valuables. It is due to open on December 13.

The Liverpool site will be on Paradise Street and has no opening date as yet.

Shares in Metro Bank had fallen by almost 14% in morning trading, from 272.6p at market opening to 234.93p by 11am.